What should Australians do with their tax return?
AUSSIES are eagerly awaiting their tax refunds and these are the smartest ways you can put your money back to good use.
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MILLIONS of taxpayers will receive a much-needed cash injection from the Australian Taxation Office in the coming weeks and many are planning to spend their tax return money wisely.
Australians often rush to get their tax returns filed in the first few months of the financial year in the hope they will receive a wad of cash back.
But experts warn taxpayers to use their returns smartly and not just fritter them away.
New data from financial institution ME quizzed 1000 Australians and found 43 per cent are expecting to save or invest their tax refund.
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And for those carrying debts about 27 per cent are planning to cull debts and tip the money into their home loan or pay down credit card debt.
Rising Tide Financial Services’ chief executive officer Chris Browne said Australians should be careful with any money they receive but also leave a portion for play.
“Spend 80 per cent wisely and spend 20 per cent on fun,’’ he said.
“Pay off your credit card debt and use it as an opportunity to live credit card free in the next financial year.”
Many credit cards attract interest rates above the 20 per cent mark so it’s vital cardholders carrying plastic debt chip into this first.
Mr Browne said ditching credit cards altogether in the new financial year is a great way to wipe the slate clean.
Latest ATO figures show in the 2016-17 financial year 13.5 million individuals and sole traders lodged a tax return themselves or through an agent and the average refund was $2500.
The ATO’s assistant commissioner, Kath Anderson, said the growth in pre-fill information available for those lodging made it much easier to file their return.
“For the 2016—17 year we pre-filled over 81 million records, to assist taxpayers and agents to get returns right,’’ she said.
“We expect to be able to prefill even more data this year as a result of increased data received from third parties.”
ME’s general manager of deposits John Powell said getting a tax refund back is a great way to kickstart the new financial year in a healthier state.
“Very few Australians factor their tax return into their household budget so it can make a big difference to your financial wellbeing when used wisely,’’ he said.
“While a home loan has one of the lowest rates of debt it’s also a long-term affair and any lump sum you tip in today can knock years off the term and save you a bundle in interest along the way.”
Other alternatives include tipping money into your super fund and maximising the benefits of compounding interest.
Mr Browne also suggests those carrying a Higher Education Loan Program (HELP debt) from university degrees should pay it off.
He said it’s “financial noise” and despite being one of the cheapest forms of debt — it’s existing rate is the consumer price index (CPI) at 1.9 per cent — it’s a good debt to pay off.
“Pay off your HELP debt to free up cash and increase your tax-home pay,’’ he said.
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